The U.S. economy experienced disappointingly weak growth in the third quarter. Data coming in during the last week suggest that the fourth quarter is starting out a little better. But it doesn’t look to me as much better as some accounts in the financial press might lead you to believe.
Auto sales would be a key factor in a normal economic recovery. November light vehicle sales were a little below values for October, but 14% above November 2010. In each of the last 3 years (though not so much in the 4 years before that), sales fell more substantially from October to November, so standard seasonal adjustment procedures report a seasonally adjusted figure for this November that might appear somewhat more encouraging. But note that last month’s sales are still 16% below the average values seen for November during 2004-2007.
Improvement was also observed in the ISM manufacturing survey, whose index rose from 50.8 for October to 52.7 for November. A value above 50 indicates that the number of facilities reporting improving conditions outnumbered those reporting decline. The ISM measure implies that manufacturing has been growing all year, with the pace of growth picking up in November. The problem is we usually expect to see growth, not stagnation. A value of 53.3 is the historical median for the manufacturing PMI, and the November reading is a little below that. The only reason the latest report sounds encouraging is because the previous 4 months had been even further below average.
And we ended the week with an employment report that could have been worse. According to the BLS survey of establishments, there were 120,000 more Americans working (on a seasonally adjusted basis) in November than in October, and the gain would have been 140,000 had it not been for the ongoing declines in the number of people employed by state and local governments. More encouraging was the 278,000 estimated gain reported in the BLS’s separate survey of households. The two surveys are in broader agreement if you look at 12-month averages. We see an average employment gain over the last year of 133,000 per month from the establishment numbers and 139,000 per month from the household. Those are the sort of numbers that just keep pace with the growing population, and really don’t make much progress in reducing the size of the army of unemployed U.S. workers. True, the unemployment rate (derived from the household survey) has fallen from 9.8% a year ago to 8.6% last month. But the biggest single factor in that has been the growing number of Americans who are now characterized as “not in the labor force.” Each month over the last year, on average America has added 149,000 new people over 16 who are not working and not actively looking for work. In other words, the number of American adults who are “not in the labor force” is growing faster than the number who actually have jobs.
Hence the summary with which I started– things are looking a little better, but not a whole lot.